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Tech start-ups enjoying boom in European venture capital options

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Created: 28 February 2017

Never been a better time to start a technology export business

Brexit has not dampened the chances of UK companies getting venture capital from Europe, it seems. In fact, more ventures seem to be going “through to the next round” in the new series of The Brexit Factor.London-based Atomico announced in February that it has raised a £613 million ($765 million) in funding for speculation (AKA investment) in the European technology startup sector.

In total Atomico has now raised a total of £1.2 billion ($1.5 billion) in order to seed fund UK and European companies across Europe with the hope that at least one of them may grow into a billion dollar business.

CEO Niklas Zennström founded the company 10 years ago after leaving Skype. He now claims it is the largest fund of its kind in Europe. With its HQ in Mayfair, London, Europe’s largest source of venture capital funds offers a distinct advantage to UK companies seeking funding from the EU.

Atomico raises the new capital from the traditionally risk-averse wealthy family offices and pension funds of Europe, where startups have long-struggled to scale to the same size as their US rivals thanks to restricted diet of capital, according to Zennström. Meanwhile institutional investors in the US are much keener to punt their billions into venture capital.

"If the European pension funds allocated half a percent of their assets to European venture, that funding gap would disappear," said Zennström. "We have all the ingredients here and we don't need to raise money from the US. There is plenty of capital here."

In September Zennström told the press he believes the next Facebook will come from Europe because there is an increasing level of funding available. Five of the world's top 10 computer science institutions can now be found in Europe, namely ETH, Oxford, Imperial, EPF, and TU Munich. There are also more professional engineers in Europe (4.7 million) now than there are in the US (4.1 million). There's also an increasing number of business development managers for start-ups to hire.

"When I was recruiting people to Skype, it was hard to find experience at a fast-growing start-up so you had to hire people from the US to come," said Zennström. Today, there will be a legacy of people working for Skype, Spotify, lastminute.com, King or Zoopla. There are many more people who've learned the skills to scale a fast growing company.

Zennström is reported to have a net worth of $1.3 billion (£890 million).

Europe has never created an exporter like Apple or an Amazon-sized tech company and the nearest equivalent in Britain, Cambridge chip designer ARM, was acquired last year by SoftBank for £26 billion. However, Zennström says the time could be coming for a resurgence in UK vendors, because the talent pool is wider and inventors are emerging outside of the traditional tech hubs of London and Cambridge.Atomico has invested in 85 companies to date. The new Atomico IV fund

will be used to back approximately 25 start-ups across all stages over the next three to four years. Nine companies have already received funding, including Austria-based Lilium Aviation which is developing a flying car."We like to back entrepreneurs who have big ambition. But also when they are about to scale," said Zennström. "So we would come in when they have achieved a product market fit and the company needs to shift focus from innovation to scaling. That means we're investing in Series A or later, say B or C."

Meanwhile, more funds are coming on the European market. Rocket Internet raised an £800 million fund in January and Japanese tech giant SoftBank announced an £80 billion tech fund last October. Other venture capital firms with European start up funds include Index and Balderton. Atomic IV is the largest to date.

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